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United India Insurance to go in for price rationalisation

United India Insurance Company Ltd. has decided to go in for rationalisation of product pricing to improve profitability, according to a top official.

“Our thrust will be on charging appropriate rates for our products,’’ United India Chairman-cum-Managing Director A. Hoda said in an interview here on Thursday.

Mr. Hoda said price rationalisation was a part of an exercise to beef up the profitability of the insurer.

A combination of factors such as wage arrears-related outgo and losses due to unprecedented floods in Chennai late last year had seen its profit after tax slip to Rs.221 crore in 2015-16 from Rs.300 crore in the year-earlier period.

Right pricing
Mr. Hoda said the focus this year would be on improving both the bottom and top lines. He asserted that right pricing of assorted risks was a key to this objective.

The insurer, he said, was also planning to make a foray into products for the agricultural sector even as it stepped up its focus on personal line business. All these initiatives would help considerably increase the bottom line of the company, he said.

The company had set itself a gross premium target of Rs.14,444 crore this year. The insurer wrote a gross premium of Rs.12,250 crore in 2015-16.

Mr. Hoda said property and marine insurance had been dwindling in importance. Though they continued to grow in absolute numbers, they had been declining in relative terms.

Consequently, the company, he said, was giving a big push to retail segment comprising motor and health insurance.

A host of factors – ranging from high cost of treatment to the increasing propensity of corporates to offer health cover to attract talent – had seen health insurance practices in India aligning with those in western countries, he said.

Going digital
With the market dynamics changing fast and modern youth driven by technology, he felt the public sector insurer had to quickly go the digital way.

According to him, online sales fetched less than Rs.100 crore in premium for the company last year.

The company was working to plug this gap by offering an end-to-end online solution. A pilot was on already in Chennai, he said.

A complete roll-out could happen in a few months, he said. He felt that digitisation would help the public sector insurer bring in more customers, save in distribution cost and offer low-premium products in segments that were hitherto untapped.

Mr. Hoda said the company was also in the midst of an exercise to improve its brand equity.

The objective was to increase the overall visibility of the company, he added.

Source: The Hindu

3 foreign re-insurers set to get IRDA approval

Jun 16, 2016

The Insurance Regulatory and Development Authority of India (IRDA) is likely to accord final approval to three foreign re-insurers to set up onshore branches for starting direct operations by the end of this month.

IRDAI sources told BusinessLine that the IRDA Board would take up the subject at its meeting towards the end of June. Four foreign re-reinsurance players — Germany’s Munich Re and Hannover Re, Switzerland’s Swiss Re and France’s SCOR — have already got the preliminary approval, called R1 in the insurance parlance.

This time around, “the final approval may be granted to a few — most likely to three”, said an insider in the domestic regulator.

The final approvals will formally open up the Indian market for major foreign re-insurers to carry out direct business.

Foreign re-insurers have so far been operating in India through offshore sites.

IRDA, after opening the door for all foreign re-insurers, except Lloyd’s, for registration and setting up branches in the country last October, also paved way for Lloyd’s entry into the country in a separate regulatory guideline in November.

Source: The Hindu Business Line

General insurers’ premium income grows 19.4% in May

Jun 16, 2016

Gross direct premium income of general insurance companies grew 19.4% year-on-year in May, with private players continuing to report higher growth compared with their public sector peers, data from the General Insurance Council showed.

In May, the general insurance industry saw gross premium income at R8,267.45 crore, against R6,923.96 crore in May last year. Private insurers’ gross premium income stood at R3,510.24 crore, up by 22% compared with the year-ago period. Public sector companies witnessed a Y-o-Y growth of 17.2% at R4,250.99 crore in May.

In the last few months, private players continued to perform better than public sector insurers. Market participants say despite profits made by public sector general insurers, their high combined ratio might spoil valuations if they plan
to list.

“If we look at the performance of public sector insurers, many of them are having an underwriting losses and their combined ratio is weak compared to private players. But currently, no private general insurance companies have announced their desire to list on the stocks exchanges. If we look at public sector players, they are trying to bring underwriting losses down and even improve their combined ratio,” said a top insurance player.

The combined ratio (expense ratio plus loss ratio) indicates a product’s profitability, and the ratio over 100% means it is not profitable.

Senior officials in the industry say on an average the combined ratio for private insurers is at 110%, while for a few public sector insurance companies, it is 115% or even more.

However, private insurers believe that they have worked hard to bring down underwriting losses and it is not only about high combined ratio.

Source: Financial Express

Soon, more players can hawk insurance online

Jun 10, 2016

You could soon buy insurance through a mobile app, thanks to a new initiative by the Insurance Regulatory and Development Authority of India (IRDAI).

The regulator is planning to put in place an insurance self-network platform which could be used by an agent to sell and service products on behalf of registered insurers.

“The insurance self-network platform will be available as a regular internet website or as a mobile app or both,” Randip Singh Jagpal, Senior Joint Director, IRDAI, said in a circular sent to chief executive officers of insurance companies.

The objective is to promote e-commerce in the insurance space, which will lower the cost of transacting insurance business and bring higher efficiencies and greater reach.

“E-commerce is seen as an effective medium to increase insurance penetration and bring financial inclusion in a cost-efficient manner,” Jagpal said.

All products approved under the regulations will be allowed to be sold through these platforms and they should be prefixed with the letter “i-” to distinguish them from regular products.

From both the industry and consumer angles this move will have significant implications. Till now, only insurers and web-aggregators were allowed to sell online. But now, many others in the distribution chain will also be able to sell online, according to Sanjay Tripathy, Senior Executive Vice-President – Marketing, Product, Analytics Digital & E-commerce, HDFC Life.

“This is the first time that IRDAI has recognised such a platform with robust security features. Even differential pricing of products will be permitted,” he said, adding that the move will help insurers cut costs.

Insurers will also have to create e-insurance accounts in accordance with norms to sell policies on the self-network platform.

For online sales, premiums will be paid via credit/debit cards, Net banking or any other electronic mode as permitted by the Reserve Bank of India.

On completion of an online transaction, the policy document will be credited to the buyer’s e-insurance account.

According to industry estimates, less than 3 per cent of new business (approximately ₹300 crore) is transacted online now.

Source: The Hindu Business Line

Improving insurance penetration through common service centers

Jun 6, 2016

An army of digitally trained individuals are leading a silent entrepreneurship revolution in the heart of Indian villages. Through common service centers (CSC) or Jan Seva Kendras, many young people (some even teenagers) have enrolled to become Rural Authorised Persons (RAP) to solicit business. These individuals need to undergo training and examination as specified by the Insurance Regulatory and Development Authority of India (Irdai), in the subject of insurance products and other necessary topics. The online examination for RAPs is conducted by the National Institute of Electronics and Information Technology or any other institute as approved by Itdai from time to time in their center spread across India. Through RAPs, the sale and procurement of general insurance products are extended among the vicinity of the village or town that they reside in.

But before we go into how CSCs can be used to increase insurance penetration, here is a background on the workings of a CSC.

A CSC is a low-cost setup and distribution center for government institutions to deliver e-governance services to the rural population. The CSC-SPV (special purpose vehicle) has been established by the Indian government under the National e-Governance Plan. To monitor and supervise the progression of CSC-SPVs, a State Designated Agency (SDA) acts as a nodal agency, and the Service Centre Agency (SCA) becomes the implementing agency which provides the required investment budget and the functional specification of the CSC as identified by the SDA.

Keeping in mind the eligibility norms to operate a CSC, the principal officer, a person employed by the CSC-SPV, should have a clean history without involvement in financial forgery or criminal acts, and should have the requisite qualifications and experience.

Insurance companies enter into an agreement with CSC-SPVs for distribution of its products through these centers. The timeline for such an agreement is fixed for three years. Insurance companies at their end, amalgamate their technology portals with the interface used by CSC-SPVs. A RAP within the contours of the village is authorised to solicit insurance business on completion of the necessary training and examination as specified by the authority. A RAP sells and procures general insurance products. The essential paper work and identification of the insured are seamlessly carried out at the CSC with the help of technology tools.

Premiums are collected by CSC-SPV centers in cash, which is later remitted to the insurer. The policy contract, too, is submitted to the prospect through the RAPs.

Such personal touch points through RAPs have given those in villages access to simple-to-understand products to mitigate the risk to life, motor, agriculture pump sets, personal accident insurance and farmers’ package policies. By limiting the sum insured of these products to Rs.2 lakh (other than for motor insurance), insurers are able to extend such micro-covers and obviate the risk emerging from such groups. Further, insurers have consciously decided to keep away complex products which require specialised knowledge on premium computation for RAPs’ to solicit and service products.

The freshly-created category of over-the-counter products are not only easy to comprehend for the village-level entrepreneur, but also the right entry-level product for the rural population.

A new channel of marketing and distribution of insurance products has been created through these digitally-equipped CSCs. The might of 157,000 technology-driven access points, which is growing each day, lies in the unexplored locally available talent across age groups. Today, Anganwadi workers, young local talent and even specially-abled people have joined the CSC movement, thus improving their skill sets and possibilities of a better livelihood.

These entrepreneurs on the ground level have the power to connect with local communities, which no outsider with the strongest branding campaign can create. The prowess of understanding the needs and speaking the same dialect as the local communities are creating a win-win situation. Task of expanding rural insurance penetration would no longer need tremendous efforts in creating the on-ground infrastructure. A cost-effective and efficient network is ready to be harnessed.

By imparting knowledge and training on curbing frauds, companies can embark on such progressive initiatives to arrest future fraudulent activities. Usually, frauds such as misrepresentation of underwriting data is being passed by the RAPs to the insurance company and non-integrity of complaint handling, claim assistance and settlement is envisaged while operating from such centers. If any of the entities are found guilty of fraud, necessary termination or suspension of the CSC-SPV, and cancellation of certificate of the RAP is immediately acted upon.

Wearing the mantle of inclusive development is not the responsibility of the government alone. By handholding village-level entrepreneurs and honing the skills of rural India through the CSC movement, insurance companies can play a crucial role in improving social and financial development.

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